Value Capture and Sustainable Infrastructure

By Michael Daley

Sydney is home to 4 million people. By 2031 it is predicted to be a city of 6 million. Within the lifetime of most of the people reading this, we will see Sydney grow to a city of 8 million people – the size of London today.

It took over 200 years for Sydney to build all the houses, all the roads, the schools, the Opera Houses and Harbour Bridges to accommodate the needs of 4 million people. But now we’ll have to do that all again… in the space of only 40 years.

This is a huge task. A task that will stretch the capability of our governments and our institutions. It is a task that will challenge our politics and test the patience of our citizens.

Sydney is already struggling to meet the needs of our existing citizens, let alone the demands of another 4 million people.

We need to ask ourselves whether the tools and policies we have traditionally relied upon to manage growth are still relevant to the job ahead. And, in particular, we need to ask ourselves how we will continue to fund future projects.

The much-touted mega projects that are currently in the pipeline for Sydney are being funded through the NSW Government’s sale of profitable public assets. This strategy is finite simply because valuable government land and assets are limited in number. That’s a simple fact. As much as Labor opposed the sale of these electricity assets, it is a done deal and complaining about it won’t change that. So now is the time to discover and implement brave strategies to stretch the returns on sale and available capital further.

Value capture must be part of the equation.

Consult Australia, in partnership with AECOM, released a report in June last year, which concluded that:

Value capture funding methods have evolved to become both effective decision-making tools and funding mechanisms for transport infrastructure and urban renewal projects.

New infrastructure projects increase the value of surrounding land. Governments and the taxpayers who ultimately fund infrastructure, should benefit financially from that increased value; to capture it in some way and apply it to the public benefit. But that’s not happening in NSW.

A live example – the Sydney Metro, at a whopping cost of $12 billion, from Chatswood to Bankstown. Value capture should have been part of the mix but it isn’t. Why? The government announced the route and the developers moved in and have largely made their money. Nothing wrong with that, except from the perspective of the taxpayer, it’s a huge lost opportunity. Wasteful and inexplicable.

But it doesn’t stop there. The Northwest Metro. 33km of tunnel and viaduct at a cost of more than $8 billion to the taxpayer. No value capture. The Eastern Suburbs Light Rail, over $2 billion. Wrong project, wrong place, wrong time. But never mind, developers are crawling over every lot on Anzac Parade desperate to buy into that value-enhanced corridor. Tailormade for a value capture model to recover some of the $2 billion. But none. The Berejiklian Government is missing in action – but it is too late now, the horse has bolted. On projects like these, the motorist, the commuter, and the taxpayer will be groaning under the weight of these financing models for decades. It’s not a panacea, but value capture should have done at least some of the heavy lifting. Why it isn’t is a mystery and an indication that not all’s well in the Berjiklian Government. To ensure the future growth of Sydney, it is essential that the government ensure that profits from current projects flow back to the taxpayer not just to the developers. That every effort be made to get the best value

On projects like these, the motorist, the commuter, and the taxpayer will be groaning under the weight of these financing models for decades. It’s not a panacea, but value capture should have done at least some of the heavy lifting. Why it isn’t is a mystery and an indication that not all’s well in the Berejiklian Government.

To ensure the future growth of Sydney, it is essential that the government ensure that profits from current projects flow back to the taxpayer not just to the developers. That every effort be made to get the best value from the public dollar.

And the secrecy around the planning and financing has to stop. There should be an urgent national discussion about a nationally-accepted, transparent method of the assessment of government infrastructure projects and their ability to fund future projects. Too often, each area of infrastructure planning is siloed and secretive. The conception and the scoping, the assessment and the funding and financing models of large projects should be planned and developed as one.

Sydney is on an upward trajectory with no end in sight, but if we want the city to remain liveable for everyone and not just the well-heeled, we need to change the way we do things now.